Richard Qiangdong Liu (left), founder, chairman and CEO of JD.com and Robert Greifeld, Nasdaq CEO, celebrate after the company has its initial public offering on the Nasdaq exchange yesterday in New York City.
Reuters/Beijing
Shares of Chinese e-commerce firm JD.com soared almost 20% in their market debut as investors sought a piece of China’s booming online retail market, auguring well for Alibaba Group’s hotly anticipated float later this year.
JD.com, China’s No. 2 e-commerce company after Alibaba, is counting on the strong growth in the country’s online market to help it become the “largest e-commerce company in the world.”
But while its IPO is the biggest yet by a Chinese company in the US, the offering is widely expected to be dwarfed later this year when Alibaba launches what will probably be the biggest IPO by a tech company in history.
The offering of American Depositary Shares raised $1.78bn after being priced at $19 each, above the expected range of $16 to $18. JD.com’s share was $1.31bn. The company’s shares touched a high of $22.26 yesterday after opening at $21.75 on the Nasdaq, giving the company a market value of $31bn.
“The momentum seems to be moving in the right direction for Alibaba,” said Rett Wallace, chief executive of Triton Research, which analyses startup companies.
Wall Street’s appetite for Chinese technology stocks recovered in 2013 after a series of accounting scandals in 2011 resulted in a sharp fall in listings. Until JD.com’s IPO, seven Chinese companies had gone public in the US this year, raising $1.21bn. In all of 2013, eight Chinese companies raised about $884mn.
BofA Merrill Lynch and UBS Investment Bank were the lead underwriters of the JD.com offering. JD.com, which has never made a profit, is often compared to Amazon.com, which sells directly to consumers, while Alibaba is often likened to eBay Inc, which mainly facilitates sales between members. The company, whose shareholders include Saudi billionaire Prince Alwaleed bin Talal’s Kingdom Holding Co, is China’s largest online direct sales company, accounting for almost half of the market. But it operates in the shadow of Alibaba, which commands an 80% share of an e-commerce market that – according to iResearch – is expected to grow more than 30% on an annual basis to $626bn by 2016. The company posted a loss of $8mn in 2013 and warned that it “may incur net losses for some time in the future” as it invests in warehouses and delivery vehicles. JD.com’s founder and CEO, Richard Liu, retains control of almost 84% of the voting power in the company, and at yesterday’s early high his stake is worth about $6.5bn. JD.Com said ahead of the offering that Liu had been awarded a one-off share-based bonus worth $891mn at the IPO price, raising questions again about governance and shareholders’ rights at Chinese firms.